Can you claim both HRA and Home Loan Interest Deduction in Income Tax?

ResignationWhat is House Rent Allowance?

HRA ia an amont which is paid by employers to employees as a part of their salaries.HRA is a kind of exemption,which can be provided only if the employee is living in a rented accomodation.In case of an employee lives in his/her house,they can not claim HRA.

How is HRA computed?

HRA depends on the salary of an employee.

t shall be the least of the following:-

1. Excess of rent paid annually or 10% of annual salary
2. 50% of basic salary(in case residence is a metro city), orelse 40% of basic salary(in case residence is a non metro city)
3. Actual amount alloted by the employer as HRA.

Is any deduction available w.r.t interest on loan for purchase/construction of house property?

Homeowners can claim a deduction on their home loan interest, if the owner or his family resides in the house property under section 24 of Income Tax Act, 1961 while computing ‘Income From House Property’.

Interest deduction is restricted to Rs 2 lakhs under Section 24. However, deduction on interest is limited to Rs. 30,000 instead of Rs 2 lakhs if both the following conditions are satisfied:-

1. The loan is taken on or after 1st April,1999.
2. Purchase or construction is not completed within 5years from te end of the FY in which loan was taken.

What are the instances where a person will require the benefit of HRA as well as interest deduction under section 24?

Provided below are some of the common instances, where a person will require the benefit of HRA as well as interest deduction under section 24?

1. where a person may be working in a different city and paying rent there but the family stays in a different city in a house for which the person may be paying interest as well
2. where a person owns the house smaller in size but may be staying in another house on rent which is bigger and fit for his requirement
3. where a person may have bought the house but may not be able to shift immediately due to vicinity of the existing school of the children where he is staying on rent, etc.

The primary test is if the person is living in Rented House and has person paying rent on property. In that case a person can claim HRA irrespective he claims interest on housing loan

Can You Claim Both HRA And Home Loan For Tax Exemption?

For instance, there can be a situation where a person works in one city where he/she lives on rent, and his/her family resides in another city, where the person has bought a home where his/her family is residing.

Homeowners, who are paying back their home loan and getting HRA as part of their salary, can avail both the house property related tax benefits to lower their taxable income.

Computation of Income House Property:-

Particulars	Amount
Gross Annual Value(GAV)	Nil(as the property is not let out)
(-)Deduction u/s 24
Standard Deduction @30%	Nil(as GAV is Nil)
Interest (18,000 * 12) restricted to Rs 2 lakhs	(2,00,000)
Income from House Property	(2,00,000)